September 22, 2021

Editor's Page

Labor Pains

Mark R. Howard | 5/26/2021

Among the many new Floridians arriving in the wake of the pandemic is Jeff Korzenik, who relocated with his wife from Chicago to St. Petersburg this fall. Korzenik, chief investment strategist for one of the country’s largest banks, spends more than 100 days a year traveling the country, meeting with thousands of clients, and he’s developed a wealth of insights into the economy and markets.

In the course of his travels, he became interested in the labor market — specifically, how U.S. businesses will meet a worsening shortage of workers that’s likely to become permanent. Demographics, as they say, are destiny: U.S. birth rates peaked in 1990 and have fallen below the rate at which our society can replace those who age out of the workforce. The U.S. economy needs about 2.5 million new workers a year, and immigration and growth in the native-born, working-age population won’t fill the gap. We’re falling short by at least 1 million workers a year.

Along with the demographic challenge, three factors further constrict the labor supply: First, during the Great Recession, large numbers of people were out of work for extended periods, with many jobless for more than a year. Research shows that people unemployed for more than 27 weeks tend to have a hard time re-entering the workforce. Many have just dropped out of the workforce altogether.

Second, along with killing more than 45,000 people each year since 2017, opioid prescription and/or addiction keep several million workers idle. One study found that 43% of the decline in male labor-force participation rates and 25% of the decline for women between 1999-2015 was associated with opioids.

The third factor — Korzenik’s focus in addressing the labor shortage — is the cycle of high incarceration rates and high recidivism in the U.S. since the 1960s. As has been widely reported, the U.S. leads developed nations in the percentage of the population it puts behind bars. Also widely reported is the fact that more than 90% of the felons in prison will be released at some point — and face big challenges in re-integrating themselves into society, particularly in finding jobs.

More than 19 million Americans now have a felony conviction, and “any touch with the criminal justice system can be an obstacle to employment,” Korzenik says — even for some who’ve committed misdemeanors, and also for the 10 million convicted of felonies who paid for their crimes with community service, fines or county jail time and never spent a day in prison.

Many employers won’t consider anyone with a criminal record, however — believing that those with criminal records have character flaws, a high chance of violence or theft or could create liability issues for the business.

Korzenik has written a how-to book for businesses called Untapped Talent: How Second Chance Hiring Works for Your Business and the Community in which he argues that businesses can effectively recruit from the pool of convicted criminals — and should if they hope to fill the labor shortage.

What I like about the book aside from clear writing and solid data is Korzenik’s lack of sentimentality. He expends no verbiage making the moral case for second-chance hiring. For Korzenik, it’s a matter of supply and demand. “The argument for second-chance hiring must stand alone as a business case to be sustainable and scalable,” he writes.

He doesn’t soft-pedal some challenging realities. Convicted murderers frighten employers, but those who’ve committed a single, unpremeditated murder are better hiring risks than those who commit “non-violent” property and drug crimes, data show. Korzenik estimates that around a third of those who leave prison are ready for employment, a third can be made ready and a third — whether because of mental illness, addiction or character issues — aren’t viable employees. “Our model is not about creating a path to employment for everyone,” he writes. “Our model is employer-centric, finding the people who can fill a business’s need for labor.”

And he documents businesses from all parts of the country and all industries that have succeeded at second-chance hiring — from Brown’s Super Stores, one of the country’s top small grocery chains, to Johns Hopkins Health System. At Cincinnati’s Nehemiah Manufacturing, 130 of 180 employees are second-chance hires, turnover is a fraction of industry averages and the productivity increases have added more than 5% to EBITDA. Even the U.S. military has expanded a waiver program that enables recruitment of some felony offenders.

Success in second-chance hiring, Korzenik writes, comes down to two major elements: First, identifying those who are ready for employment. Second, supporting the worker’s employment by working with non-profits and government agencies that can provide training or services related to housing, counseling and transportation. At Nehemiah, for example, owner Dan Meyer, a Wharton grad, says, “I don’t have HR people. I have social workers” who provide wraparound services.

While sticking to the business case for second-chance hiring, Korzenik isn’t blind to the potential social impact. Whatever the causative factors, one in three black men in the U.S. has a felony conviction. “It is hard to see how we can get to the kind of society we want when the burden of that kind of unfairness falls so disproportionately on one segment of our fellow citizens. Second-chance hiring isn’t about addressing those ills, but it is a critical pathway to doing so.”

Korzenik says that business owners “want future generations of Americans to have the same opportunities to succeed that they had. It’s hard to achieve that if people aren’t given the opportunity to move beyond their past. Most people in the business community know that giving people a second chance is the right thing to do. The missing link has been a pathway to do this in a way that makes business sense.

“The path to a more equitable society,” he writes, “must be paved by the business community.”

— Mark Howard, Executive Editor
[mhoward@floridatrend.com]

 

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